Quiz 26: Tax Qualification Requirements Continued

Business

Internal Revenue Code (IRC) is the statutory tax that has various volumes to cover income tax, payroll tax, estate tax, gift tax and excise tax. It also explains the procedure of each taxation and its administration. a According to the given problem, mention the public policy objectives related to service and vesting. Unser service and vesting, it has to ensure that participants will get the tax benefit under the plan. The service and vesting requirement has to fulfill the public policy aim in accordance of providing benefits to the employees. b According to the given problem, mention the public policy objectives related to limits on plan contribution and benefits. The federal authority of taxation cannot taxed the plan benefits and in addition provides tax benefits at the time of making the contribution to a qualified plan. Therefore, limiting the benefits and contribution, restricts the tax preference and increases the tax revenue. c According to the given problem, mention the public policy objectives related to joint and survivor annuities. The basic objective related to joint and survivor annuities is that participants receive the benefits in case of spouse provides signed waiver, and protect the interest of spouse. In case of non-working spouse, objectives are more specific to safeguard the interest. d According to the given problem, mention the public policy objectives related to top-heavy rules The top-heavy rules restricts the small business and professional corporates that has limited number of employees. It provides a limited level of security against retirement plans.

Internal Revenue Code (IRC) is the statutory tax that has various volumes to cover income tax, payroll tax, estate tax, gift tax and excise tax. It also explains the procedure of each taxation and its administration. According to the given problem, mention the key areas where specific regulation is required for determination of service. The IRC specifies the three key areas that are required for determination of services. These areas are as follows: • Initial eligibility to participate is to be recognized in the form of employment year, financial year or calendar year. This is termed as computation period. • Vesting is the period where employee has to serve for the organization on continuous basis so to avail the benefits at the end of the period. • Right to a benefit accrued when an employee successfully completes vesting period and the right to a benefit is legally enforceable.

Internal Revenue Code (IRC) is the statutory tax that has various volumes to cover income tax, payroll tax, estate tax, gift tax and excise tax. It also explains the procedure of each taxation and its administration. a According to the given problem, must employer has to aggregates Plan A and Plan B in estimation of top-heaviness. Employer cannot merge the two plans which are Plan A for key employees and Plan B for non-key employees. As this is not compulsory to merger both the plans for estimating the top-heaviness. b According to the given problem, may employer have to aggregates Plan A and Plan B in estimation of top-heaviness. The employer can merge two or more plans until it does not violates the nondiscrimination rules. Here, Plan A is for key employees and Plan B is for non-key employees, so merger of both the plans affect the existence of the plans. The contribution and benefits provided under both the plans are different. c According to the given problem, mention the requirement of aggregation of both the plans. When the aggregate amount of the plans are considered as top-heavy then it is compulsory to consider the plans individually as top-heavy. Therefore, employer does not want to get covered under top-heaviness so as to avoids further legal requirements.

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